This was a week where I tracked 93 data releases, and found13 surprises but 21 shocks - a solidly negative week in other words. Europe was hit hard, Asia was hurt only mildly, and the US was neutral.
The highlights for me this week included:
The extraordinary net financial strength of the US household sector. which is allowing it to shrug off the worst of what the Fed can throw at them. Households are also enthusiastically swapping out of bank deposits into money market funds and bond holdings.
The US householders can live with the Fed, but can the rest of the world?
So the second issue showing up this week was Eurostat’s downward revisions to 4Q and 1Q GDP results, showing 0.1% qoq contractions in both quarters. Recession then, albeit mild. But with real output per worker falling sharply even as capital stock per worker rises, there’s going to be more pressure on employment in for the foreseeable future. And with liquidity preference (M1/M2) also falling, we can also expect continued domestic demand pressure.
Conclusion? Eurozone’s recession has started, but only just, and it will probably deepen from here.
And plenty more. . .
